While we all go into marriage hoping and thinking it will last, the truth is that 50% of marriages end in divorce. So what about those who are on their second—or third, or fourth…—marriage? If you’re someone who has had more than one marriage, it is vital that you start estate planning early, and work to avoid these five mistakes.
Mistake #1: Not Changing Beneficiaries
The most common mistake that estate planning attorneys see is an individual not changing the beneficiary on their 401K or other financial documents. Can you imagine being married to someone who passes away, and then learning that their first spouse is the beneficiary on their retirement accounts? A mistake like this would land your estate in probate, and the court would then decide who would inherit your money.
In addition to changing your beneficiaries, it’s also important to update any power of attorney documents, especially your advanced medical directive. Although most states remove an ex-spouse’s the power to act under these documents upon divorce, there is no obligation of a bank or health care provider to inquire as to the current marital status. No one wants a disgruntled ex-spouse to be in charge of their medical decisions after they’ve remarried.
Mistake #2: Not Changing Your Will or Trust
In addition to changing the beneficiary on your bank and retirement accounts, it’s also important to change the beneficiary designations in your will or trust. Your will or trust outlines all the remaining assets you accumulated in your lifetime, and who they should be passed along to after you die. It’s critical that your will or trust is updated to reflect the correct beneficiary (i.e. your new spouse), or it will—again—end in a potentially-messy probate hearing.
Mistake #3: Treating All Heirs Equally
If you’re coming into your second marriage with children from a previous marriage or relationship—and you have more assets than your new partner—it’s important to take this into account while inheritance planning. For example, you may want your house to be sold after your death, and the proceeds to go to your children, while your partner receives other assets. Or, say you have a child who has suffered from drug addiction or financial issues, you may want to add money to a spendthrift trust that would disperse regular payments rather than a large sum of money at once.
Mistake #4: Waiting Until Your Gone to Give
You can currently gift up to $15,000 per person—or $30,000 per married couple—per year, without having to pay the federal gift tax. There is no limitation on gifts to spouse’s which, in conjunction with a premarital agreement, could be an effective tool to protect your assets for your children while ensuring your new spouse is provided for in the event of death.
Mistake #5: Skipping the Lawyer and Doing Nothing
State law determines who receives your assets at death if you don’t have a will or trust – potentially giving more or less than intended to your new spouse and your children if you do nothing. Even if you have few assets, it’s important to speak with an estate planning attorney regarding estate planning for blended families. If you have kids and multiple marriages, things can get complicated quickly. Speaking with a lawyer, and having them go through the estate planning process with you the correct way, will uncomplicate things for both you and any heirs you may have.
To learn more about estate planning for your second marriage, don’t hesitate to contact the dedicated team at Caress Law either by calling (503) 292-8990 or using the contact form on our website. Caress Law, PC also offers a Family Protector Program, which is a monthly program designed to ensure your family is protected now, and in the future. Contact us to learn more about this valuable program.